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Shareholders itch for a sale

Bitter lawsuit reveals split over the fate of former Linnton mill

Many former employees of the Linnton Plywood Mill are furious that it has not yet been sold.

The former employees all own one share each of the Linnton Plywood Association, which has owned and operated the mill for more than 30 years. They believe a settlement in a 2001 lawsuit required the association's board of directors to sell the property shortly after it closed for lack of work more than four years ago.

According to Lomnicky, the settlement requires that the profits from the sale be divided equally among all former employees, including him, who own a share of the association. He estimates there are approximately 120 current shareholders, many of whom are retired and living on a fixed income.

'A lot of us could use the money now,' he said.

Another former employee, who asked not to be identified, agreed.

'We don't have any idea what's going on with the property,' he said.

The mill is at the middle of a controversy over the best use of approximately 35 underutilized acres along the west bank of the Willamette River in the Linnton neighborhood just north of the St. Johns Bridge.

Portland developer John Beardsley wants to build a biodiesel processing plant on the site. He offered $6 million for the property on Sept. 12, 2005. The former employees say the settlement obligated the board to accept Beardsley's offer - or at least enter into serious negotiations over it.

Instead, according to Beardsley, the board did not respond to the offer, either in writing or orally.

Contacted by the Portland Tribune, association Secretary Gail Holter declined to respond to questions about the settlement, saying he will discuss it only with members.

'Are you a member? I don't have to respond to you,' Holter said.

Lomnicky believes the board is holding out for more money. Developer Homer Williams has said publicly he will develop the site as a mixed-use project if the City Council changes the zoning to allow residential and retail uses. The council is scheduled to take up the issue July 16.

Although Williams would not say how much he has offered for the property, Lomnicky believes it is more than $6 million. But an association of industrial businesses along the river called the Working Water Coalition has promised to fight the zone change, in court if necessary - potentially delaying the sale to Williams for many years.

'The residential development is never going to happen, or at least not in the foreseeable future,' Lomnicky said.

Workers did well for decades

The settlement is among the records generated by the suit on file with the Multnomah County Circuit Court. They reveal a bitter split and dispute between association shareholders, rooted in deep financial problems when the timber industry began to decline in the 1980s.

According to the records, the association originally was incorporated as the Columbia Plywood Association in February 1951. The common stock - or shares - of the corporation could be bought and owned only by members of the association who worked for the corporation 'in the production of forestry products or the manufacturing of the same into commodities.' Each owner was entitled to one vote at the association's meetings.

The records say that each shareholder was entitled to a dividend if the association made a profit. Conversely, if the association lost money, each member was required to contribute to the deficit. The association was authorized to keep a portion of each member's dividend - called a patronage retainer - to apply against future deficits.

The association's name was changed to Linnton Plywood Association in April 1951. For most of the next half-century, its mill along the river was a good place to work. Lomnicky said workers could expect to earn $50,000 a year or more in the 1970s and shares sold for up to $100,000.

But, the court records say, the 1990 listing of the spotted owl as an endangered species caused timber prices to escalate, which 'directly and negatively affected the Association's ability to operate profitably.'

According to the records, after 1990, work slowed down so much that many employees were unable to earn a living wage. The association helped arrange for some to be retrained under a federal program to help displaced timber industry workers. Some simply found other work.

The court records show that the association operated at a loss throughout the 1990s. Under the rules governing the association, shareholders were forced to pay money back into the association to offset the losses. If the shareholder had sufficient patronage retainer funds, the association took the money from there. If not, the association billed the shareholders. According to the records, 'The Association actually sued those who did not, or could not, pay and more than one was forced into bankruptcy.'

According to the records, at a special membership meeting Nov. 5, 1992, the association voted to terminate the membership of those members who were not working. The suit alleges that the nonworking members were not notified of the meeting, however. Fifty-three of the terminated members or their heirs sued the association to be reinstated nearly eight years later - in July 2000.

Terms address liquidation

Lomnicky said it took so long to file the suit because the terminated members did not have much money and could not find an attorney willing to take the case on contingency. According to Lomnicky, they finally agreed to contribute $1,000 each to retain Edward Trompke of the Tarlow, Jordan and Schrader law firm.

The association responded that the suit was filed too late, however. It hired attorney Michael Gentry with the Tooze, Duden, Creamer, Frank and Hutchinson law firm, who argued that the statute of limitations gave the terminated members only three years to sue over the vote.

The two sides settled the suit the year after it was filed. The former members granted the association's directors all decision-making authority. But the settlement also says that if the association does not make a profit for three consecutive years, the directors shall adopt a liquidation plan for the mill and property 'as soon as is reasonably practicable.'

The directors closed the mill before three years passed, however. It ceased operating in 2002. According to Lomnicky, this means the directors should have immediately begun liquidating it.

Several suitors strategize

It is unclear how the dispute within the association will affect the redevelopment of the mill site. The Portland Planning Commission voted May 30 to recommend that the comprehensive land use governing the site be amended to allow both industrial and residential uses. The council must approve that, however.

Beardsley still hopes to buy the property. He and Tualatin businessman Rece Bly want to build a biodiesel processing plant on the site, which lies in the middle of the Linnton Energy Cluster, a collection of petroleum storage tanks served by the Olympic Pipeline, which runs along U.S. Highway 30 in front of the property.

Beardsley and Bly say they are talking to Trompke about the former members' interest in the property but will not discuss the details or status the discussions. Trompke declined to discuss the situation with the Portland Tribune.

Williams also remains interested in the site. In a Feb. 22 letter to the Portland Planning Commission, he said that if the property is rezoned, 'we would proceed with development of the site as a mixed-use urban residential neighborhood development.'